Appendix 4
The Federal Election Campaign Laws:A Short History

Before the 1971 Federal Elections Laws

The first Federal campaign finance legislation was an 1867 law that prohibited
Federal officers from requesting contributions from Navy Yard workers. Over
the next hundred years, Congress enacted a series of laws which sought broader
regulation of Federal campaign financing. These legislative initiatives,
taken together, sought to:

Limit contributions to ensure that wealthy individuals and special
interest groups did not have a disproportionate influence on Federal elections;

Prohibit certain sources of funds for Federal campaign purposes;

Control campaign spending; and

Require public disclosure of campaign finances to deter abuse and to
educate the electorate.

This effort to bring about more comprehensive campaign finance reform
began in 1907 when Congress passed the Tillman Act, which prohibited corporations
and national banks from contributing money to Federal campaigns. The first
Federal campaign disclosure legislation was a 1910 law affecting House elections
only. In 1911, the law was amended to cover Senate elections as well, and
to set spending limits for all Congressional candidates.

The Federal Corrupt Practices Act of 1925, which affected general election
activity only, strengthened disclosure requirements and increased expenditure
limits. The Hatch Act of 1939 and its 1940 amendments asserted the right
of Congress to regulate primary elections and included provisions limiting
contributions and expenditures in Congressional elections. The Taft-Hartley
Act of 1947 barred both labor unions and corporations from making expenditures
and contributions in Federal elections.

The campaign finance provisions of all of these laws were largely ignored,
however, because none provided an institutional framework to administer
their provisions effectively. The laws had other flaws as well. For example,
spending limits applied only to committees active in two or more States.
Further, candidates could avoid the spending limit and disclosure requirements
altogether because a candidate who claimed to have no knowledge of spending
on his behalf was not liable under the 1925 Act.

The evasion of disclosure provisions became evident when Congress passed
the more stringent disclosure provisions of the 1971 Federal Election Campaign
Act (FECA). In 1968, still under the old law, House and Senate candidates
reported spending $8.5 million, while in 1972, after the passage of the
FECA, spending reported by Congressional candidates jumped to $88.9 million.1

The 1971 Election Laws

The Federal Election Campaign Act of 1971 (P.L. 92-225), together with
the 1971 Revenue Act (P.L. 92-178), initiated fundamental changes in Federal
campaign finance laws. The FECA, effective April 7, 1972, not only required
full reporting of campaign contributions and expenditures, but also limited
spending on media advertisements.2 (These limits
were later repealed.)

The FECA also provided the basic legislative framework for separate segregated
funds,3 popularly referred to as PACs (political
action committees), established by corporations and unions. Although the
Tillman Act and the Taft-Hartley Act of 1947 banned direct contributions
by corporations and labor unions to influence Federal elections, the FECA
provided an exception whereby corporations and unions could use treasury
funds to establish, operate and solicit voluntary contributions for the
organization's separate segregated fund (i.e., PAC). These voluntary donations
could then be used to contribute to Federal races.

Under the Revenue Act-the first of a series of laws implementing Federal
financing of Presidential elections-citizens could check a box on their
tax forms authorizing the Federal government to use one of their tax dollars
to finance Presidential campaigns in the general election.4
Congress implemented the program in 1973 and, by 1976, enough tax money
had accumulated to fund the 1976 election-the first publicly funded Federal
election in U.S. history.

The Federal Election Campaign Act of 1971 did not provide for a single,
independent body to monitor and enforce the law. Instead, the Clerk of the
House, the Secretary of the Senate and the Comptroller General of the United
States General Accounting Office (GAO) monitored compliance with the FECA,
and the Justice Department was responsible for prosecuting violations of
the law referred by the overseeing officials. Following the 1972 elections,
although Congressional officials referred about 7,000 cases to the Justice
Department, and the Comptroller General referred about 100 cases to Justice,5 few were litigated.

1974 Amendments

Not until 1974, following the documentation of campaign abuses in the
1972 Presidential elections, did a consensus emerge to create an independent
body to ensure compliance with the campaign finance laws. Comprehensive
amendments to the FECA (P.L. No. 93-443) established the Federal Election
Commission, an independent agency to assume the administrative functions
previously divided between Congressional officers and GAO. The Commission
was given jurisdiction in civil enforcement matters, authority to write
regulations and responsibility for monitoring compliance with the FECA.
Additionally, the amendments transferred from GAO to the Commission the
function of serving as a national clearinghouse for information on the administration
of elections.

Under the 1974 amendments, the President, the Speaker of the House and
the President pro tempore of the Senate each appointed two of the six voting
Commissioners. The Secretary of the Senate and the Clerk of the House were
designated nonvoting, exofficio Commissioners. The first Commissioners were
sworn in on April 14, 1975.

The 1974 amendments also completed the system currently used for the
public financing of Presidential elections. The amendments provided for
partial Federal funding, in the form of matching funds, for Presidential
primary candidates and also extended public funding to political parties
to finance their Presidential nominating conventions.

Complementing these provisions, Congress also enacted strict limits on
both contributions and expenditures. These limits applied to all candidates
for Federal office and to political committees influencing Federal elections.6

Another amendment relaxed a 1939 prohibition on contributions from Federal
government contractors. The FECA, as amended, now permitted corporations
and unions with Federal contracts to establish and operate PACs.

Buckley v. Valeo

Key provisions of the 1974 amendments were immediately challenged as
unconstitutional in a lawsuit filed by Senator James L. Buckley (Republican
Senator from New York) and Eugene McCarthy (former Democratic Senator from
Minnesota) against the Secretary of the Senate, Francis R. Valeo. The Supreme
Court handed down its ruling on January 30, 1976. Buckley v. Valeo,
424 U.S. 1 (1976).

The Court upheld contribution limits because they served the government's
interest in safeguarding the integrity of elections. However, the Court
overturned the expenditure limits, stating: "It is clear that a primary
effect of these expenditure limitations is to restrict the quantity of campaign
speech by individuals, groups and candidates. The restrictions. . . limit
political expression at the core of our electoral process and of First Amendment
freedoms." Acknowledging that both contribution and spending limits
had First Amendment implications, the Court stated that the new law's "expenditure
ceiling impose significantly more severe restrictions on protected freedom
of political expression and association than do its limitations on financial
contributions." The Court implied, however, that the expenditure limits
placed on publicly funded candidates were constitutional because Presidential
candidates were free to disregard the limits if they chose to reject public
financing; later, the Court affirmed this ruling in Republican National
Committee v. FEC. 445 U.S. 955 (1980).

The Court also sustained other provisions of the public funding law and
upheld disclosure and recordkeeping requirements. However, the Court found
that the method of appointing FEC Commissioners violated the constitutional
principle of separation of powers, since Congress, not the President, appointed
four of the Commissioners, who exercised executive powers. As a result,
beginning on March 22, 1976, the Commission could no longer exercise its
executive powers.7 The agency resumed full activity
in May, when, under the 1976 amendments to the FECA, the Commission was
reconstituted and the President appointed six Commission members, who were
confirmed by the Senate.

1976 Amendments

In response to the Supreme Court's decision, Congress revised campaign
finance legislation yet again. The new amendments, enacted on May 11, 1976,
repealed expenditure limits (except for candidates who accepted public funding)
and revised the provision governing the appointment of Commissioners.

The 1976 amendments contained other changes, including provisions that
limited the scope of PAC fundraising by corporations and labor organizations.
Preceding this curtailment of PAC solicitations, the FEC had issued an advisory
opinion, AO 1975­23 (the SunPAC opinion), confirming that the 1971 law
permitted a corporation to use treasury money to establish, operate and
solicit contributions to a PAC. The opinion also permitted corporations
and their PACs to solicit the corporation's employees as well as its stockholders.
The 1976 amendments, however, put significant restrictions on PAC solicitations,
specifying who could be solicited and how solicitations would be conducted.
In addition, a single contribution limit was adopted for all PACs established
by the same union or corporation.

1979 Amendments

Building upon the experience of the 1976 and 1978 elections, Congress
made further changes in the law. The 1979 amendments to the FECA (P.L. 96-187),
enacted on January 8, 1980, included provisions that simplified reporting
requirements, encouraged party activity at State and local levels and increased
the public funding grants for Presidential nominating conventions. Minor
amendments were adopted in 1977, 1982, 1983 and 1984.

Summary

In one decade, Congress has fundamentally altered the regulation of Federal
campaign finances. Through the passage of the Revenue Act, the FECA and
its amendments, Congress has provided public financing for Presidential
elections, limited contributions in Federal elections, required substantial
disclosure of campaign financial activity and created an independent agency
to administer and enforce these provisions.

1. Congressional Quarterly Weekly Report,
Vol. xxvii, No. 49, December 5, 1969, p. 2435; Clerk of the House, "The
Annual Statistical Report of Contributions and Expenditures Made During
the 1972 Election Campaigns for the U.S. House of Representatives"
(1974), p. 161; Secretary of the Senate, "The Annual Statistical Report
of Receipts and Expenditures Made in connection with Elections for the U.S.
Senate in 1972" [undated], p. 33.

2. "Contribution" and "expenditure"
are special terms defined in 2 U.S.C. and 11 CFR.

3. "Separate segregated fund" is
a special term defined in 2 U.S.C. and 11 CFR.

4. In 1966, Congress enacted a law to provide
for public funding of Presidential elections, but suspended the law a year
later. It would have included a taxpayers' checkoff provision similar to
that later embodied in the 1971 law.

5. Comptroller General of the United States,
"Report of the Office of Federal Elections of the General Accounting
Office in Administering the Federal Election Campaign Act of 1971"
(February 1975), pp. 23 and 24.

6. "Political committee" is a special
term defined in 2 U.S.C. and 11 CFR.